Association Health Plans Reinvigorated-New Options for Many Employers

Association Health Plans have been reinvigorated by the new regulations released yesterday by the US Department of Labor (DOL). As I mentioned in my blog entry yesterday, these regulations are the result of President Trump’s executive order last year instructing the DOL to allow for more flexibility related to the Affordable Care Act (ACA), and health insurance. As we are parsing the 198 pages of comments and final regulations, it is clear that the final regulations loosen many restrictions on “association health plans” (AHPs). Now, more small businesses, including self-employed (sole proprietors) employers, can either become members of, or even establish their own, AHP for themselves and their employees.

In the past, AHPs were generally governed by the rules of the small business market, which limited flexibility and “buying power” for that AHP.  AHPs will now be considered part of the large-group health market. This will result in more flexible designs, including to what extent the AHP will cover the ACA’ s 10 “essential” health benefits.” (Generally, outpatient services, emergency services, inpatient (hospitalization) services, pregnancy, maternity, and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative and habilitative services and devices (such as physical therapy), laboratory services, preventive and wellness services and chronic disease management (such as annual physicals and flu shots),and pediatric services, including oral and vision coverage). However, all AHPs plans will still be required to cover preexisting conditions.

This change in the regulations will allow health issuers to tailor policies for AHPs, covering only the services that the employers want to include, which will likely reduce premium costs. These types of policies may also appeal to younger, healthier individuals, with older, sicker populations remaining in the small group or individual market. The new regulations also eliminate the geographical restriction that would not allow association to offer coverage across state lines. For example, “southern plumbers” could form an AHP that covered plumbers in all of the Southern states, not just restricted to, for example, Georgia. In the past, AHPs had to have a “commonality of interest” test that was quite restrictive. Now, AHPs will be able to band together employers whose only common interest is getting insurance coverage through the AHP!

Employers should not drop their health coverage just yet. The new AHP rules are being implemented in stages next year. Also, one note of caution: while AHPs have existed for many years and have worked well for some groups, there have also been unscrupulous operators of AHPs who either claimed to cover services they did not, and/or or who failed to pay claims. While the new rules relax AHPs requirements, many of the consumer protections already existing in the AHP regulations remain intact. Careful investigation into the AHP will still be necessary. Stay tuned for more details.